Corporate Loyalty--an oxymoron

Where did all the American firms go?
By Paul A. Herbig .

Newsnote: In March 2004, German Chancellor Gerhard Schroder called multinationals that transfer jobs to lower cost countries “unpatriotic.”

The Fortune 1000 and their service counterparts (Banks, Brokerages, insurance, Transportation) can no longer be considered American companies but, instead, multinational entities. This is not mere semantics. American companies have loyalty and commitment to the United States and the communities they reside in. Not so for multinational concerns, which most all the larger corporations have become. Their entire mission is to be globally competitive (in itself not an altogether evil concept but as taken to the extreme as it has been, it has considerable negative consequences to the local communities and nation as a whole). Multinational corporations, in general, could care less where a product is manufactured nor where it is developed as long as it is available on a global basis for a competitive price. Any cost savings do not necessarily go into lower product costs nor higher innovation nor additional research and development as economists would have you believe but rather into higher profits which translates into higher bonuses and salaries for the executives and higher stock prices for the privileged few owners of the stocks. The German Chancellor is right but patriotism for most multinationals serves no purpose at a stockholder’s meeting, during a board meeting, or to the marketplace.

Just examine our own local communities. What entities belong to the Chamber of Commerce? Which ones regularly donate goods for charities or raffles or school functions? Local small businesses. The larger chains, the big boxes, the corporate owned fast food franchises, have no stakes in the community save to pluck as much cash out as possible to ship it to their headquarters, wherever that may be. What commitment do these firms (mostly divisions or branches of the Fortune 1000) have to our communities? None. And that is the way they want it to be.

A Paradox analogous to the tragedy of the commons is inevitable here. The multinationals covet the American marketplace, the hundreds of millions of (right now) well-off consumers. Yet they wish to eventually serve that market from afar with minimum or no high-priced American labor. They are counting on all the other companies to stay in America providing high wage jobs to provide income to spend on their own goods made overseas and services provided offshore. What is going to happen when most if not all companies decide to exploit labor arbitrage and seek the lowest possible costs? What companies will be left producing in the US to provide those high paying jobs to allow the other companies to continue to supply their foreign made goods to the American consumer? (The answer: as few as possible unless we the people do something and fast). What will happen when a critical mass of companies have gone overseas is analogical a volcanic crater when all the lava has been expelled: a catastrophic implosive collapse of the economy, the currency, the social climate. A rapid descent into a second or even third world economy could well result.

And what of the major multinational corporations? With the North American market gone, very little reason exists for any headquarter or development function to remain here. It would probably be better served in a country that is ascending, not one that has descended to the depths. Multinationals are only interested in marketing to affluent markets but producing products at the lowest possible prices. What causes affluence? The availability (or inevitable lack) of high paying jobs which, by definition, the multinationals will seek to move elsewhere to the lowest possible cost source, and in so doing will destroy the very affluence they feed off. Unlike a parasite, though, once their host has been consumed, they will not necessarily die with it but move on to the next market, the next lowest cost producing country, ever seeking that absolute bottom: where workers will pay them for the privilege of working for the corporation.

Corporate Loyalty. Dream on. That concept died years ago.